Belarus reduces potash production

Potash fertilizer’s exports to foreign markets have reduced for objective reasons. The usual administrative levers used by the Belarusian leadership in a crisis, are useless in this case. Potash fertilizer’s production has to be cut down for the sake of potassium chloride export prices.

On December 7^th, a governmental meeting about potash fertilizers’ exports took place.

In 2012 one of the main Belarusian exports, potassium chloride, may be in trouble. Potash production in January-October 2012 decreased by 6.8% compared with 2011. The projected foreign-currency proceeds at USD 3.2 billion by the year-end will not be met due to the lack of contracts with China.

There are few players at the global potash market. In order to maintain potassium chloride export prices, potash producers are prepared to cut production and to reduce exports.

In January – September 2012 exports of Belarusian potash fertilizers have been reduced in physical terms by 17.8%, while in value terms, exports fell by 14.3% over the same period in 2011. Potassium chloride price was maintained and even increased by a significant reduction in the supply volume.

Belaruskali’s partner in Belarusian Potash Company (BPC is the monopoly trader of Belarusian and Russian fertilizer producers in the world market), Uralkali, in December 2012-April 2013, will reduce the potash fertilizers’ production in order to bring the Chinese stocks down to 2 million tones. That would be the starting point for a new round of negotiations about the potash fertilizers supply to the market. The production volumes could be recovered, but not until May 2013.

Belaruskali’s performance in 2012, the global economic situation, plans of Belaruskali’s business partners, and no high-profile personnel changes in the Belaruskali’s management may imply the following. The Belarusian government, despite the need for foreign-currency proceeds and habitual adherence to administrative management style, now has to adjust to the situation and agree to a reduced production of potash fertilizers along the same lines as BPC’s partner (volume and timeframe), for the sake of maintaining the price at the current level. An alternative would be to reduce the contract price, which is unacceptable not only for the Russian partners, but also for the main market exporters.